Brisbane sees 138,500sqm of new industrial space supply in Q1

Over 80% of these completions were pre-committed.

Despite the delays experienced to the delivery of industrial projects in Brisbane from the previous quarter, JLL says the completion to a substantial number of projects came to fruition over 1Q23. Quarterly completions totalled 138,500 sqm, of which 81% was pre-committed.

Of the projects that completed, the majority were delivered within the Southern precinct (83.7%), followed by the Northern (2.6%) and Trade Coast (13.8%) precincts. We currently anticipate about 535,200 sqm of stock under construction to be delivered over the course of the new year.

Here’s more from JLL:

Business conditions are expected to slow in the near term given tightening consumer budgets, hence occupier demand is expected to slow as well. Occupier activity (>3,000 sqm) over 1Q23 was positive, reaching about 124,100 sqm of gross take-up, which is in line with the 10-year quarterly average of 128,000 sqm.

Occupants within the Transport, Postal & Warehousing industries accounted for the most significant amount of total take-up (40%), followed by occupiers in Retail Trade (33%) and Manufacturing (19%).

Investment transaction volumes slow

Strong demand and limited space across the Brisbane industrial sector has allowed landlords to continue to increase rents over 1Q23 across all precincts. Quarterly growth in the Southern precinct reached 6.0%, and reached 8.2% q-o-q in the Trade Coast. Rents were stable in the Northern precinct over the quarter, influenced by rental basket changes for the new year.

Increasing caution among investors, given elevated interest rates, has seen yields continue to soften on a quarterly basis. Softening of 25 basis points (bps) was recorded across Northern and Southern precincts, while Trade Coast prime midpoint yield softened by 20 bps. The Trade Coast maintains stronger capital values given its prime location and heightened occupier demand. 

Outlook: Occupier demand to slow in the near term

Pre-lease activity continues to be prevalent as tenants try to secure their industrial needs with few options. We can expect demand to moderate amid global macroeconomic uncertainty and a slowdown in business conditions.

We can expect further delays to the delivery of developments going forward, amid inflated construction costs and labour shortages. Much of the supply pipeline remains in the Southern precinct, given greater availability of land in comparison to other precincts.

Note: Brisbane Logistics & Industrial refers to Brisbane's industrial market (all grades).